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Are trades in an IRA reported? (EVER?)
- Thread starter Toonces
- Start date
you are correct
i have an IB "margin" account. the only thing the margin gets you around is the 3 day settlement thing
you have 1:1 buying power (for stocks) and cannot short (stocks)
you CAN (and i do) trade futures in an ira
you can short futures and you can short single stock futures (which is a way to short stocks, as long as that stock has an SSF)
technically, this is not "margin" in the sense of stocks. many equity traders don't understand the difference
if i buy one contract YM at 12000, the value of the contract is 60k (12000*$5 per point)
with 5k in an IRA, you could trade at least 3 YM contracts - controlling 180k with only 5k
now with STOCKS, if you want to buy 180k of stock, you can do that with 4"1 intraday buying power by putting up your 45k and BORROWING 135k
that is how the margin works
futures are different.
if i buy 3ym with a 5k account, i am not BORROWING 175k
futures are not bought this way. you are putting in your 5k (or whatever amount it is 4200 or whatever) as good faith money to cover movement in the futures that are marked to market each day, etc.
you are not BORROWING money, like you are when u buy stocks on margin.
this is why futures are cost effective for many investors (not to mention traders) is that they can put down the good faith money and put the rest in riskless t-bills. that's why futures trade ABOVE the price of the underlying (assuming that the dividends on the stock aren't so high as to outweigh the cost effectiveness of buying futures vs. stock)
assuming i could efficiently "buy the dow" in equivelant amounts to one dow contract, it would cost me 60k to get the same control over the shares that i get with one futures contract.
this excerpt explains how futures work. that is why brokerages that do not allow "margin" in the sense of 4:1 or 2:1 for borrowing mony to control more stock DO allow futures trading
"Rather than margin being a down payment, the margin required to buy or sell a futures contract is a deposit of good faith money, which can be drawn on by your brokerage firm to cover losses or to meet margin calls during futures trading. It is very much like money held in an escrow account. Minimum margin requirements for a particular futures contract at a particular time are set by the commodity exchange on which the contract is traded. Margins are typically about five percent of the current value of the commodity contract. Exchanges continuously monitor market conditions and, when necessary, raise or reduce their margin requirements. A Commodity broker may require higher margin amounts from their customers than the exchange-set minimums."
i have an IB "margin" account. the only thing the margin gets you around is the 3 day settlement thing
you have 1:1 buying power (for stocks) and cannot short (stocks)
you CAN (and i do) trade futures in an ira
you can short futures and you can short single stock futures (which is a way to short stocks, as long as that stock has an SSF)
technically, this is not "margin" in the sense of stocks. many equity traders don't understand the difference
if i buy one contract YM at 12000, the value of the contract is 60k (12000*$5 per point)
with 5k in an IRA, you could trade at least 3 YM contracts - controlling 180k with only 5k
now with STOCKS, if you want to buy 180k of stock, you can do that with 4"1 intraday buying power by putting up your 45k and BORROWING 135k
that is how the margin works
futures are different.
if i buy 3ym with a 5k account, i am not BORROWING 175k
futures are not bought this way. you are putting in your 5k (or whatever amount it is 4200 or whatever) as good faith money to cover movement in the futures that are marked to market each day, etc.
you are not BORROWING money, like you are when u buy stocks on margin.
this is why futures are cost effective for many investors (not to mention traders) is that they can put down the good faith money and put the rest in riskless t-bills. that's why futures trade ABOVE the price of the underlying (assuming that the dividends on the stock aren't so high as to outweigh the cost effectiveness of buying futures vs. stock)
assuming i could efficiently "buy the dow" in equivelant amounts to one dow contract, it would cost me 60k to get the same control over the shares that i get with one futures contract.
this excerpt explains how futures work. that is why brokerages that do not allow "margin" in the sense of 4:1 or 2:1 for borrowing mony to control more stock DO allow futures trading
"Rather than margin being a down payment, the margin required to buy or sell a futures contract is a deposit of good faith money, which can be drawn on by your brokerage firm to cover losses or to meet margin calls during futures trading. It is very much like money held in an escrow account. Minimum margin requirements for a particular futures contract at a particular time are set by the commodity exchange on which the contract is traded. Margins are typically about five percent of the current value of the commodity contract. Exchanges continuously monitor market conditions and, when necessary, raise or reduce their margin requirements. A Commodity broker may require higher margin amounts from their customers than the exchange-set minimums."
Quote from efficiency:
IF you get the bright idea of a pre-mature distribution, you're in for a couple of surprises. One is a 10% penalty, the other is the tax liability as ordinary income toward the amount withdrawn. 10% of principal (and no tax loss beneift) is a pretty good "fine" for withdrawing what's already YOURS.
You can however withdraw funds once each year for whatever application you desire provided the same amount is returned WITHIN 60 days.
Could utilize Internal Revenue Service Code Section 72(t)(2)(a)(iv) to avoid penalty.
http://www.retireearlyhomepage.com/wdraw59.html
http://www.irs.gov/retirement/article/0,,id=103045,00.html#1
smitty
I think the IRS comes into play in the rules for how IRA assets can be invested. It specifically says that IRA assets can't be pledged for a loan without disqualification. It also mentions art and collectibles in the same fashion.
Perhaps some clever financial engineer can come up with an IRA product that lends you money to trade but doesn't use the IRA assets as collateral.
Traveler
Perhaps some clever financial engineer can come up with an IRA product that lends you money to trade but doesn't use the IRA assets as collateral.
Traveler